Insights / 30 March 2021
The Growth of SPACs
Alex Di Santo, Group Head of Private Equity, was featured in April’s IPE Magazine, where he discussed the growing trend of special purpose acquisition companies (SPACs) with David Turner.
Alex explains, “Until 24 months ago, I had not really been speaking to any of my clients about SPACs.” However, over the past year he has seen clients becoming increasingly interested – responding to “the surge in PE-sponsor-backed SPACs”.
The article explores the performance of SPAC investments, and how the way sponsors are rewarded is changing, moving away from the standard conventional incentive structure.
Although Alex is “optimistic” as “average sponsor quality is improving,” he reminds that SPAC investors still need to look out for traps. For example, he says they should be wary of private equity houses trying to offload old investments through a SPAC.
Alex believes that the work on improving incentives has also helped make sponsors more thorough. Sharing his final thoughts, he concludes “There’s an argument that the due diligence on the portfolio companies has improved and you will see that reflected in the portfolio performance over time.”
Read the full article here.